20-10-2020 Update from NCLT/IBC Cases by INSOLVENCY PROFESSIONAL RAJNISH BANSAL

The Mumbai bench of the National Company Law Tribunal (NCLT) has given green signal to JSW Steel to acquire bankrupt steel company Asian Colour Coated Ispat, more than a year after the latter's lenders approved the resolution plan. JSW Steel has offered over ?1550 crore for the 1 million tonne steel plant.

Asian Colour Coated Ispat has outstanding debt of over ?5,000 crore. On 30 June, 2019, the committee of creditors accepted JSW's bid through a majority vote. It was accepted by 80% of COC of Asian Colour Coated Ispat. The bid includes a ?1,525 crore upfront payment to lenders and another ?25 crore payment to operational creditors.

In May 2019, Mint reported that JSW Steel had improved its bid to ?1,500 crore from the previous bid of ?1,000-1,200 crore range, which bankers were unwilling to approve.

State Bank of India, Punjab National Bank and JM Financial are some of the lenders to Asian Colour Coated Ispat.

Asian Colour Coated Ispat was part of the Reserve Bank of India’s second list of 28 defaulters that banks were to refer to insolvency court. The company runs a cold rolling mill complex with an installed capacity of 3,00,000 tonnes per annum for manufacturing cold rolled, galvanised and colour-coated products for the automobile, white good and general engineering sectors.

This will be the third acquisition of a stressed asset by Sajjan Jindal-owned JSW Steel. In September 2018, the company acquired around 88% stake in Monnet Ispat and Energy Ltd under the insolvency and bankruptcy code for ?2,875 crore, in a consortium with Aion Investments. Monnet Ispat & Energy owed over ?11,000 crore to a clutch of lenders.

In December 2019, JSW Steel acquired 100% equity in stressed steel mill Vardhman Industries Ltd by infusing ?63.50 crore into the company.

?? Adani Group and Piramal Enterprises are among the four entities that have placed bids for DHFL, the first financial services player undergoing insolvency process, according to sources.

Besides, sources said, the US-based Oaktree and Hong Kong-based SC Lowy submitted bids for DHFL on October 17, the last date to submit final bids.

In November, the Reserve Bank referred DHFL, the third-largest pure-play mortgage lender, to the National Company Law Tribunal (NCLT) for insolvency proceedings.

DHFL was the first finance company to be referred to NCLT by the RBI using special powers under section 227.

Prior to that, the company's board was superseded and R Subramaniakumar was appointed as the administrator. He is also the resolution professional under the Insolvency and Bankruptcy Code (IBC).

According to sources, Oaktree has submitted bid for the entire company and the bid value is Rs 20,000 crore as against the admitted liability of Rs 95,000 crore with Rs 10,000 crore cash in hand.

Therefore, sources said, accepting Oaktree bid would result in a write-off of Rs 65,000 crore for the lenders led by State Bank of India (SBI).

Adani Group has bid for DHFL's Rs 40,000-crore wholesale and Slum Rehabilitation Authority (SRA) portfolio, valuing it at Rs 3,000 crore, sources said.

Piramal Enterprises has bid for DHFL's retail portfolio. It has quoted Rs 12,000 crore for the business and is asking for 18 per cent yield on this portfolio, they said.

According to bankers, the bid of SC Lowy, the fourth bidder, comes with so many conditions that it is unlikely to be considered.

Bankers are of the opinion that resolution of DHFL through NCLT will result in a massive write-off for the lenders and they will be stuck with over Rs 60,000 crore non-performing assets (NPAs).

DHFL did not respond to an email seeking comments on the matter.

With this kind of heavy write-off, sources said, it does not seem to be a good deal for lenders.

SBI is the lead banker with an exposure of over Rs 10,000 crore to DHFL, while LIC and EPFO will also have to write-off nearly Rs 10,000 crore.

As of July 2019, the company owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders.

DHFL was sent to bankruptcy after the government on November 15, 2019 enabled the Reserve Bank to sent large financial services companies, excluding banks, to NCLT for insolvency proceedings.

?? You may send me any queries related to: [email protected].

IP CA. RAJNISH BANSAL

B.Com, FCA, DISA, CISA, I.P.

INSOLVENCY PROFESSIONAL

FORENSIC AUDITOR &

SYSTEM AUDITOR

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Date – 20/10/2020